European stock markets showed modest gains on Tuesday following a range-bound trading session in Asia, as investors await significant corporate earnings reports for new trading signals.
The Stoxx Europe 600 index increased by 0.3% at the opening, driven by gains in the basic resources sector. This boost came after BHP Group Ltd., the world’s largest mining company, reported a full-year profit that met expectations. The company saw revenue growth in iron ore and copper despite weakening demand in China. As a result, shares of BHP’s peers, Anglo American Plc and Rio Tinto Plc, both rose by more than 1.5%.
In the United States, equity futures remained stable after technology stocks led a decline on Wall Street on Monday. Asian stock markets experienced a slight drop of 0.1%, ending a three-day streak of gains. The MSCI Asia Pacific Index had risen over 11% from August 5 through Monday. Treasury yields and the U.S. dollar were relatively unchanged.
After a robust performance earlier in the month, markets are currently pausing, reflecting growing expectations that the Federal Reserve might begin cutting interest rates in September. Nvidia Corp., a key player in the technology sector, will release its financial results on Wednesday. Investors are keenly anticipating these results for insights into demand driven by artificial intelligence, a major factor in this year’s market gains. Nvidia’s stock fell 2.3% on Monday.
Brent Schutte, Chief Investment Officer at Northwestern Mutual, noted, “Elevated valuations amid a slowing economy contribute to our cautious outlook in the near term. Although the S&P 500 has shown strong performance this year, it has been largely driven by a few tech giants, with other stocks in the index trading at lower multiples that might benefit if the market broadens.”
Japanese stocks were among the few to see gains in Asia, with small-cap and domestically oriented companies benefiting from a stronger yen.
Chinese consumption stocks faced challenges, particularly PDD Holdings Inc., which experienced a record drop after its Temu division issued a sales warning. This news added to a series of disappointments from major Chinese consumer companies. The Hang Seng Tech Index fell by up to 1.8%.
Upcoming U.S. inflation data is expected to reinforce the possibility of imminent rate cuts. A report on consumer spending will likely show that the central bank has succeeded in maintaining economic expansion. Economists anticipate that the core personal consumption expenditures (PCE) price index, excluding food and energy, will rise by 0.2% in July for the second consecutive month. This would lower the three-month annualized rate of core inflation to 2.1%, slightly above the Federal Reserve’s 2% target.
Federal Reserve Bank of San Francisco President Mary Daly has indicated that it may be time to start cutting rates, while her Richmond counterpart, Thomas Barkin, has expressed concerns about inflation but supports a gradual reduction in rates.
Ohsung Kwon of Bank of America Corp. commented, “Powell’s remarks at Jackson Hole suggest a September rate cut is likely, which supports our view of continued market rotation. However, Nvidia’s earnings, a major driver of S&P returns, remain a potential risk if they fall short of expectations.”
In commodities, oil prices fell after a three-day rally, as concerns about potential disruptions in Libyan supply were offset by a weak demand outlook. Gold prices remained relatively stable.
Upcoming Key Events:
1.U.S. Conference Board Consumer Confidence, Tuesday
2.Nvidia Earnings Report, Wednesday
3.Federal Reserve’s Raphael Bostic and Christopher Waller Speak, Wednesday
4.Eurozone Consumer Confidence, Thursday
5.U.S. GDP and Initial Jobless Claims, Thursday
6.Fed’s Raphael Bostic Speaks, Thursday
7.Japan Unemployment, Tokyo CPI, Industrial Production, Retail Sales, Friday
8.Eurozone CPI and Unemployment, Friday
9.U.S. Personal Income, Spending, PCE, and Consumer Sentiment, Friday
Market Moves:
1.The Stoxx Europe 600 rose 0.3% as of 8:10 a.m. London time
2.S&P 500 futures were little changed
3.Nasdaq 100 futures rose 0.1%
4.Dow Jones Industrial Average futures were little changed
5.MSCI Asia Pacific Index fell 0.2%
6.MSCI Emerging Markets Index fell 0.4%
Currencies:
1.Bloomberg Dollar Spot Index was little changed
2.Euro steady at $1.1167
3.Japanese yen fell 0.2% to 144.88 per dollar
4.Offshore yuan steady at 7.1263 per dollar
5.British pound rose 0.2% to $1.3211
Cryptocurrencies:
1.Bitcoin fell 1% to $62,842.08
2.Ether fell 0.1% to $2,685.65
Bonds:
1.10-year Treasury yield steady at 3.82%
2.Germany’s 10-year yield increased one basis point to 2.26%
3.Britain’s 10-year yield rose seven basis points to 3.99%
Commodities:
1.Brent crude oil rose 0.1% to $81.53 per barrel
2.Spot gold remained little changed
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